The average household in America owes nearly $133,568 in debt (including mortgages). That’s a huge burden on any family, as no one wants to be bogged down with large monthly payments. Also, let’s not forget those growing interest rates.
Debt consolidation can be a solution to your family’s credit situation. For most, it’s convenient, a safe haven from credit damage, and less expensive overall. However, that doesn’t mean there aren’t any drawbacks that you need to consider.
If you’ve ever wondered “is debt consolidation worth it?”, you’re not alone. Keep reading to see if consolidating credit card debt is the right choice for you.
Pros of Debt Consolidation
Everyone’s credit situation is unique. That means there aren’t any “one size fits all” options for how families should handle their debt. However, in most cases, the advantages of debt consolidation outweighs its risks.
Lower Interest Rates
One of the most common reasons people decide to consolidate credit payments is for the lower interest rates. How that works is instead of paying interest on, say 3-4 different credit accounts, you’re only paying on one.
Of course, interest for consolidated loans is a lot more proportionate than that. But, most lenders are usually able to offer a better rate than what you’re currently paying. On average, consolidation can save you up to 20% in extra fees.
This advantage essentially builds off the first one. Since you’re able to make lower payments on interest each month, you can put more down on the actual debt. That means, in the long run, you’re able to pay off your loans in a much quicker manner.
Saving on interest may not seem like a lot initially but over time, it certainly adds up. Loans that would take nearly a decade to pay off could be finished in as short as 5-6 years.
Convenient, Once a Month Payment
Keeping up with multiple payments each month is a huge responsibility. Not only is it difficult to remember to make payments on the correct dates, but it also makes budgeting more difficult.
Debt consolidation makes it to where you only have to remember to make one monthly payment. For most loans, you can set up a “recurring payment” option with the bank, so your payment is automatically received.
Steers You Away From Credit Damage
Another major perk of debt consolidation is it allows you to avoid damaging your credit. Families often find themselves with poor credit scores through late or missed payments. Several missed payments will put you way beneath 600.
Consolidation can prevent you from missing payments, as it puts you in a better financial situation. It’s easy to get behind on payments, but you don’t want to risk putting a default on your accounts or going bankrupt.
Cons of Debt Consolidation
Debt consolidation is usually a great move to get you caught up on bills, but you have to be careful. You can dig yourself into a pretty deep hole pretty quickly while paying back your credit loans.
Avoid Taking on New Debt
This will also put you right back to square one. Although it is tempting to use the plastic, especially if your account now shows a zero balance, you must resist. The purpose behind consolidation is to get you closer to repayment- new credit will only throw you off.
It’s recommended to enroll in a debt management program to put a hold on your accounts. However, that won’t guarantee your credit situation is taken care of, as you’re still able to open new accounts.
Be diligent in your repayment plans. Don’t compromise the hard work you’ve put into this by falling back into old habits. Take care of old debts before taking on new ones.
Consolidation Won’t Absolve You of Your Debts
It’s not enough to just sign up for a consolidation plan and keep up with your old ways. You have to be willing to work at it in just the same manner that you would with other repayment circumstances.
Debt consolidation makes it easier for you to get to a better situation. Yet, missed payments will further jeopardize your current situation.
Once you settle on a repayment plan, you must stick with it (as long as it works). If you find your consolidation plan isn’t working, then try to resettle your terms. But, don’t make any drastic changes (i.e. skipping payments) without speaking to your lender.
Is Debt Consolidation Worth It?
So, the final question is- is debt consolidation worth it? As we mentioned, no two people’s credit situation is alike. That means it takes a fair assessment of each claim before making any judgments on what’s best.
However, in most cases, consolidation is the solution people are looking for. It can bring you so many steps closer to repayment in a way that won’t totally stress you out.
But, again, you have to be willing to work on your situation and not sit by idly. Be proactive in your fight to repayment, avoid new debts, and try to pay more than what’s required.
Let’s Wrap This Up
Millions of Americans are doing the juggling act, trying to keep afloat between multiple credit payments. But, your situation doesn’t have to be this hard- you just need a better repayment option.
At Ask National Debt Relief, we strive to provide our readers with all they should know on credit matters. We understand how complex of a subject debt can be, so we work to make it easier for you.
Check out some of our other debt-related articles.